Infection of pregnant cows with noncytopathic (ncp) bovine viral diarrhea virus (BVDV) induces rapid innate and adaptive immune responses, resulting in clearance of the virus in less than 3 weeks. Seven to 14 days after inoculation of the cow, ncpBVDV crosses the placenta and induces a fetal viremia. Establishment of persistent infection with ncpBVDV in the fetus has been attributed to the inability to mount an immune response before 90–150 days of gestational age. The result is ‘immune tolerance’, persistent viral replication and shedding of ncpBVDV. In contrast, we describe the chronic upregulation of fetal Type I interferon (IFN) pathway genes and the induction of IFN-γ pathways in fetuses of cows infected on day 75 of gestation. Persistently infected (PI) fetal IFN-γ concentrations also increased at day 97 at the peak of fetal viremia and IFN-γ mRNA was significantly elevated in fetal thymus, liver and spleen 14–22 days post maternal inoculation. PI fetuses respond to ncpBVDV infection through induction of Type I IFN and IFN-γ activated genes leading to a reduction in ncpBVDV titer. We hypothesize that fetal infection with BVDV persists because of impaired induction of IFN-γ in the face of activated Type I IFN responses. Clarification of the mechanisms involved in the IFN-associated pathways during BVDV fetal infection may lead to better detection methods, antiviral compounds and selection of genetically resistant breeding animals.